Huaxin Technology: Passive components will continue to rise in price

Source: Content from United Daily News, thank you.

Walsin Technology, a major passive component manufacturer under the Walsin Lihua Group, held a shareholders' meeting yesterday (28th). Chairman Jiao Youheng said, "This year is a wonderful year." The full-year budget has been adjusted upward quarter by quarter. Unlike previous years, the second quarter's performance will be very good. The supply and demand of passive components will be tighter next quarter, and products with tight supply and demand may still increase in price. We must work hard in the second half of the year to ensure that customers do not run out of stock or materials.

Jiao Youheng said that Huaxin's budget has always been based on the principle of conservatism and stability. When the market was stable in the past, the budget was also stable. However, this year's passive component market conditions are very special. Huaxin's budget has been changing upward every quarter. These phenomena have never happened before.

Jiao Youheng said that last year's profits grew a lot compared to the previous year. In theory, the first half of the year is the off-season, but demand is still strong in the first half of this year. Based on the current foundation, the market conditions in the peak season in the second half of the year can be imagined.

He said that in addition to price increases, Huaxin is also making adjustments to its product portfolio, including increasing the proportion of shipments of products with higher added value and higher technical barriers. Therefore, the average unit price of overall products in the second half of the year still has room to rise.

He revealed that the second quarter results will be released soon and currently look very good, and the market conditions in the third quarter are also "very, very good". He has asked his colleagues to be more cautious in customer service so that customers can ship smoothly.

When a shareholder asked about the impact of the New Taiwan dollar's trend on the company's operations, Jiao Youheng said that both the renminbi and the New Taiwan dollar appreciated in the first quarter of this year, so it was more difficult. However, as the New Taiwan dollar depreciated, the second quarter looked good to outsiders.

Talking about the capacity expansion plan, Walsin Technology General Manager Gu Lijing said that the company had placed orders for equipment for capacity expansion in advance last year, and that the equipment has been gradually put in place this year and new capacity has been opened up month by month, and will contribute to performance in the second half of the year.

Passive components are hot. Small shareholders and legal persons attended the shareholders' meeting of Huaxin Technology yesterday (28th) enthusiastically. After the meeting, they frequently surrounded the company's senior management to ask questions. They were most concerned about how long this wave of tight supply and demand of passive components can last and whether there is room for price increases.

Jiao Youheng, Chairman of Huaxin Technology, pointed out that new technological applications are constantly being introduced and the demand for passive components continues to increase. He is optimistic that new applications in 5G, automotive and sensing will continue to drive future market demand growth.

Jiao Youheng believes that due to the continuous innovation of terminal applications, the tight supply and demand situation in the passive component market will definitely continue until the end of this year, but it is recommended that future changes in market supply and demand should be observed in terms of trends.

He emphasized that new forms of technological applications are constantly being innovated, including future commercial products such as 5G, automotive, 3D sensing, AI, the Internet of Things and high-speed computing. A new wave of market demand is gradually taking shape, which is why future demand will maintain a growth trend.

In addition, he also mentioned that as passive components extend to new application levels of technological products, market demand has increased significantly. Coupled with supply structure adjustments and rational expansion of production, the oversupply market situation of the past has been reversed. Customers are following up on orders and actively preparing materials, which is the main reason for the termination of the long-term quarterly decline in prices of these volatile components.

As for whether the price increase of terminal products to reflect the rising cost of components will affect market demand? Jiao Youheng said that taking mobile phones as an example, even if the rising cost of components such as passive components is really reflected, for a mid-to-high-end mobile phone, the cost will only increase by a few tens of New Taiwan dollars, which is still a low proportion of the overall cost. He does not think it will affect market demand.

Passive component aluminum electrolytic capacitors have entered the price increase phase. Taiwanese manufacturers estimate that from June to July, the effect of the price increase will gradually be reflected in revenue, which will help the operations of related companies such as Zhibao (2375) and Kaimei under the Yageo Group, as well as Kingsoft Electronics, Lelon and Japanese distributor Nichidenko.

The price increase trend of passive components continues this year. In addition to the multilayer ceramic capacitors (MLCCs), which have been the hottest since last year, the two major sub-industries of chip resistors and aluminum electrolytic capacitors have also established an upward trend this year.

In terms of aluminum electrolytic capacitors, as Japanese manufacturers have entered the second round of price increases, leading mainland manufacturer Aiwa, Hong Kong manufacturer Capxon, and Taiwanese manufacturers Kaimei, Lelon, and Kingsoft have also continued to negotiate price increases with customers, with increases ranging from 8% to 20%, depending on product gross profit and customer conditions.

Especially after Aiwa and Capxon announced price increases, clients have begun to accept the fact that non-Japanese manufacturers will also have to raise prices.

Taiwanese manufacturers estimate that the new prices will take effect gradually between June and July and will be reflected in the revenue of that month, which will improve the cost pressure caused by the rising prices of raw materials such as aluminum foil.

The source of this wave of price increases for aluminum electrolytic capacitors comes from the fact that Japanese manufacturer Rubicon was the first to improve its profit structure in response to the requirements of its creditor banks. It withdrew from unprofitable areas in the third quarter of last year and raised the prices of its products by 10% across the board to its clients.

Subsequently, the world's leading aluminum electrolytic capacitor manufacturer Nippom Chemi-Con and another major manufacturer Nichicon followed suit in the fourth quarter of last year, and Taiwanese manufacturers followed suit in the first quarter of this year, and finally entered the stage of actual price increases at the end of the second quarter.

Suppliers pointed out that the delivery time of some aluminum electrolytic capacitors has been extended to more than six months, which is higher than MLCC. In addition, the upstream aluminum foil is in short supply and prices continue to rise. The overall supply chain shortage and price increase situation is difficult to resolve this year.

Today is the 1632nd issue of content shared by "Semiconductor Industry Observer" for you, welcome to follow.